Voxx Boosted To Buy At B Riley, 'Growth Seems Inevitable'

In a report published Monday, B Riley analyst Scott Tilghmann upgraded the rating on VOXX International Corp (NASDAQ: VOXX) to Buy, while establishing a price target of $11.

Voxx reported its 1Q operating income in-line with the forecasts. The revenues for the quarter came under pressure due to forex and West Coast port issues. The operating loss of $765K was in-line, as the "bulk of the top-line pressures" were offset by "naturally hedged expenses." Voxx's gross margins for the quarter totaled 29.2 percent, well ahead of the B Riley estimate of 28 percent and last year's figure of 28.4 percent.

New product launches and OEM programs are expected to boost Voxx's revenues in 4Q and thereafter. "Although FX remains a near-term (3Q in particular) headwind, we believe the company is poised for revenue growth beginning in 4Q with optionality baked into some of its nearer-term launches," analyst Scott Tilghmann wrote.

The uncertainty around the company's 360Fly contract negotiations is expected to be "short-lived" in view of the exclusivity granted to both the parties, Tilghmann pointed out.

The revenue estimate for FY16 has been reduced from $736.4 million to $712.4 million to reflect currency pressures. The EPS estimate for FY16 has been raised from $0.54 to $0.60 to reflect margin expansion.

In the report B Riley noted, "Over the last few years, VOXX shares have traded in a range of about 6x-8x on an EV/EBITDA basis. We think the return to growth will help move valuation up, as will debt repayment."